S&P lifts KB Home to stable, rates convertibles B

Standard & Poor's said it revised the outlook on KB Home to stable from negative and affirmed its B corporate credit rating and B issue-level ratings on its $1.7 billion of debt.

S&P also said it assigned a B issue-level rating and a 3 recovery rating to KB Home's proposed $150 million convertible senior notes due 2019.

The agency also said it revised the recovery rating on its existing notes to 3 from 4, indicating 50% to 70% expected recovery in a default.

The proceeds from the convertible senior note sale, as well as a concurrent $100 million common equity sale, will be used for general corporate purposes.

S&P said the proceeds will bolster KB Home's cash liquidity, which the company could use to fund additional investments in land and possibly repay its 2014 debt maturity.

The ratings reflect the company's highly leveraged financial profile as evidenced by high book and EBITDA based leverage metrics, the agency said.

But, the company's market position in regions that are experiencing a sound recovery and investments in new products and communities should contribute to volume growth in fiscal 2013 and beyond, S&P said.

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